Separating Contract and Promise

Contract has been conceptualized as a species of promise. This prevailing approach obscures essential differences between legally binding and everyday, or “private,” promises. The moral character of a private promise depends on the fact that it is not only freely made but also freely kept. Contractual promises are not intended to have and do not have this voluntary character. In making a private promise, a promisor creates a sufficient reason to perform the content of her promise: the very fact of her promise. To the extent she simultaneously creates a second sufficient reason—liability in the case of breach—the first reason does no work, or there is no way to confirm the independent sufficiency of the first reason. Similarly, in the private practice of promise, the fact of promise is itself the ground for the promisee’s belief that the promisor will perform. To the extent the promisee is given independent assurance of performance, she cannot objectively rely on the fact of promise alone. The very act of contracting removes one from the moral world of private promise. By better appreciating the difference between contract and private promise, we can better mark the appropriate domain of contract law. Where overlap with the domain of private promise is justified, as in the regulation of marriage, appreciating the tension between private and legal promise may help explain why the extension of contract has been difficult to achieve in practice. It also suggests that we can mitigate the conflict between private and legal promise by minimizing their overlap. This can be done by limiting the remedies for breach to ones that the private promise did not contemplate. In other contexts, the distinction between private and legal promise calls for the expansion of the domain of contract. For example, some promises made in the context of radical inequality in power, as in most employment circumstances, are located outside the law. To the extent we see the depersonalization of the employment relationship as an important achievement of the liberal market economy, the account here clarifies one task of contract law: the displacement of private promise in the realm of employment. I. THE SEPARATE DOMAINS OF CONTRACT AND PRIVATE PROMISE ....................... 713 A. The Character of Private Promising .......................................................... 713 B. The Character of Contract ............................................................. 725 C. Objections to the Divergence of Contract and Private Promise ................. 730 II. REGULATING PRIVATE PROMISE .......................................................................... 737 A. The Scope of Enforceable Promises ............................................................ 739 B. Remedies for Breach of Private Promise .................................................... 744 III. FALSE PRIVATE PROMISE AND THE EXPANSION OF CONTRACT ........................... 749 IV. CONCLUSION ........................................................................................................ 757 Contract has been conceptualized as a species of promise. Most famously, Charles Fried has argued that contracts should be enforced because they are promises.1 More recently, Daniel Markovits has defended a theory of contract that takes contract to be a special case of * Assistant Professor of Law, University of Pennsylvania Law School; J.D. 2003, Yale Law School; M.Sc. 2000, Oxford University; A.B. 1999, Harvard University. Many thanks to Jules Coleman, Scott Shapiro, and others who provided feedback at the Yale-Stanford Junior Faculty Forum. I am also grateful to Randy Barnett, Barbara Fried, Gregory Klass, Ethan Leib, Nate Oman, Daniel Markovits, Seana Shiffrin, and participants in workshops at Georgetown Law Center, William and Mary Law School and the XXIII World Congress of Philosophy of Law and Social Philosophy. 1. See generally CHARLES FRIED, CONTRACT AS PROMISE (1981). 708 FLORIDA STATE UNIVERSITY LAW REVIEW [Vol. 38:707 promise,2 and Seana Shiffrin has suggested ways in which the obligations of contract and promise diverge, a problem only because those subject to contractual obligations are ostensibly also subject to the norms of promise.3 As Shiffrin and others have pointed out, “U.S. contract law represents that a contract is an enforceable promise” and “[t]he language of promises, promisees, and promisors saturates contract law” and its surrounding literature.4 Treating contractual promise as a kind of promise highlights certain important aspects of contracting, including the communication of a commitment to future action and the delegation of partial authority over future conduct to another person. Contract and promise do not uniquely share those features; one might communicate a commitment to future action that is not intended to benefit the person to whom the commitment is communicated, and the communication might not amount to either contract or promise. Similarly, one might delegate authority over some future decision upward or downward without it amounting to either contract or promise. Contract and promise also differ in fundamental ways that I will explore in this Article. But it is clear that contract and promise on their faces seem to belong to some family, even if each simultaneously has equally close or closer relations with other kinds of acts. Perhaps because of their familial relations, the similarities between contract and promise are too easily assumed and often overemphasized. The result has been to obscure essential differences between legally binding and everyday, or what I will call “private,” promises. The moral character of a private promise depends on the fact that it is not only freely made but also freely kept. Most contractual promises are not intended to have and (by definition) do not have this voluntary character.5 2. See Daniel Markovits, Contract and Collaboration, 113 YALE L.J. 1417, 1448 (2004) (arguing that “[c]ontract presents a special case of promise” and that contract is a “class of promises”). 3. See generally Seana Valentine Shiffrin, The Divergence of Contract and Promise, 120 HARV. L. REV. 708 (2007). 4. Id. at 721. 5. Dori Kimel has made a related point. He has suggested that the keeping of promises and reliance on promises communicates trust and that enforceability interferes with this expression. By systematically creating powerful reasons to refrain in the first place from conduct which amounts to harming the other party, enforceability casts a thick and all-encompassing veil over parties’ motives and attitudes towards each other, thus leaving reliance, performance, and other aspects of contractual conduct largely devoid of expressive content—the kind of expressive content that promissory conduct so typically possesses. Dori Kimel, Neutrality, Autonomy, and Freedom of Contract, 21 OXFORD J. LEGAL STUD. 473, 491 (2001) [hereinafter Kimel, Neutrality]; see also DORI KIMEL, FROM PROMISE TO CONTRACT: TOWARDS A LIBERAL THEORY OF CONTRACT 29 (2005) [hereinafter KIMEL, PROMISE]. 2011] SEPARATING CONTRACT AND PROMISE 709 My goal in this Article is not to catalogue the various similarities and differences, as though to demarcate the fuzzy boundaries of the circle of contract as it is situated in a larger circle of promise. Nor do I purport to have discovered a logical incompatibility between contract and promise; indeed, I take for granted that contract is a species of promise. Rather, I will argue that, in an important sense, contract and private promise are in tension with one another. My aim is to demonstrate a natural tendency on the part of contract, when layered on promise, to undermine the value of private promise. The reasons for enforcing contract are sometimes taken to be derivative from the reasons to keep one’s promise, or the reasons to support an institution of promise are taken to be reasons to support an institution of contract. Contractual obligation is then thought to reinforce promissory obligation. But private promises which are given the status of contract are not thereby elevated. A private promise marked as contractual actually loses (at least some of) its promissory quality. The reasons for keeping and relying upon a private promise are in part replaced, rather than merely augmented, by the reasons for keeping and relying upon a contract. In most contracts, one of the two following scenarios is likely: In the first, the agreement between contractual promisor and contractual promisee is not taken to be an exchange of private promise, and thus the law readily recognizes it as a contract. In the second, because the agreement between the promisor and promisee is of a character that the law is reluctant to imbue with legal status, the parties must go out of their way to signal that theirs is a legal rather than a private affair. In both scenarios, the promisor essentially opts out of the private practice of promising when she assigns to a third party the authority to coerce performance of her promise. Similarly, the promisee essentially opts out of the practice of promising by demanding or accepting that what would otherwise be a private promise is instead converted to a legally binding commitment. Why does contract begin where private promise ends? Because the objective reasons that apply to promisor and promisee are replaced once what was a promise is subject to legal intervention. In making a private promise, a promisor ordinarily creates a sufficient reason to perform the content of her promise: the very fact of her promise.6 To 6. The promise will not always be a sufficient reason. It can be overcome by other reasons, including reasons pertaining to the interests of third parties and, as discussed below, reasons relating to the interests of the promisor herself. Characterizing the promise as a sufficient reason to perform does not imply that this exhaustively describes the proper structure of the promisor’s reasoning; I will not attempt such an account here. I note, though, that the effect of the promise may also be to exclude certain other reasons, as argued by Joseph Raz. See JOSEPH RAZ, PRACTICAL REASON AND NORMS (1990); Joseph Raz, Reasons for Action, Decisions and Norms, 84 MIND 481, 492-94 (1975). For example, reasons that speak to whether the promisor has reason to do anything 710 FLORIDA STATE UNIVERSITY LAW REVIEW [Vol. 38:707 the extent she simultaneously creates a second sufficient reason— liability in the case of breach—the first reason does no work, or there is no way for the independent sufficiency of the first reason to manifest itself objectively. Similarly, when making a private promise, the promisor gives the promisee ground for belief that the promisor will perform: again, the fact of promise. To the extent the promisee is given independent assurance of performance, she cannot objectively rely on the fact of promise alone. Because private promises, but not all promises, are intended not only to assume obligation but to communicate the reordering of interests in which that obligation consists, it is important for the reasons created by private promise to do observable work for both promisor and promisee. Some contractual promises coexist with private promises of the same content. But their coexistence is uneasy, because invoking the specter of the law undermines the moral commitment contained in a promise from the perspective of both promisor and promisee. The content of that commitment is possible only within a close personal relationship. It entails a combining of interests that were previously separately held by promisor and promisee. In a private promise, the promisor undertakes to give the promisee’s relevant interests weight equal to or greater than her own. Contract, by contrast, turns on the separateness of these interests. The specter of legal liability creates a reason for performance that stems from the separateness rather than the unity of interests between promisor and promisee. A sincere intent on the part of the promisor to perform for reasons unrelated to legal obligation does not dissipate this tension any more than a sincere intent on the part of the more powerful party in a dispute to resolve that dispute fairly would render her unilateral decision just. The tension between contracting and private promising is evident when one considers which commitments usually take the contractual form. The typical contract is a commercial, arm’s length bargain, and those are the agreements the law most readily recognizes as contractual. The law is reluctant to enforce commitments made within the context of personal relationships, i.e., in precisely those contexts in which one would expect private promise to reign. To the extent contract liability—and not the unity of interests accomplished by promise— might either motivate the promisor to perform or assure the promisee of performance, any accompanying personal promise is corrupted. for the promisee might be excluded. But on my account, the exclusionary effect is perhaps narrower than contemplated by Raz. The promise does not, for example, exclude considerations of all first order reasons that went into the making of the promise, such as the inconvenience created by performance. 2011] SEPARATING CONTRACT AND PROMISE 711 My aim is not to characterize private promise as more valuable than contract, but rather to suggest that by appreciating the difference between them, we can better mark the appropriate domain of contract law. I hope to offer an account of the relationship between contract and private promise that better accounts for everyday practice and intuition, as well as existing law. But as our practices and intuitions regarding promise vary considerably, and as the principles motivating various legal rules are ambiguous, my purpose is also to offer an attractive model of contract’s relations with related promissory practices with which we can critically assess doctrine. We can then refine doctrine to better support valuable moral practices and to undermine morally repugnant ones. To a large extent, existing rules already wisely limit the application of contract law to most private promises. Where overlap with the domain of private promise is justified, as in the regulation of marriage, appreciating the tension between private and legal promise may help explain why the justified extension of contract has been difficult to achieve in practice.7 It also suggests that we can mitigate the conflict between private and legal promise by minimizing their overlap. This can be done in part by limiting the remedies for breach to ones that the private promise did not contemplate. In the context of personal relationships, this justifies the award of reliance damages rather than either expectation damages or specific performance. Reliance damages redress the injury inflicted by breach of the promise, in which the state may have a legitimate interest, but do not have the effect of either coercing performance or rendering the promisee indifferent to performance. In other contexts, the distinction between private and legal promise calls for an expansion of the domain of contract. For example, promises made in the context of radical inequality in power, as in most employment circumstances, are often located outside the law. A promisor with vastly superior bargaining power need not promise in the contractual form in order to induce the desired conduct by the promisee; the promisor has no incentive to submit the unequal relationship to legal authority. “Downward” promises between hierarchically situated persons are not easily enforced by the state. Thus, performance of those promises usually remains at the discretion of the promisor. Such promises are false private promises. To the extent we see the depersonalization of the employment relationship as an important achievement of the liberal market economy, this account clarifies one task of contract law: the displacement of private promise in 7. My argument for avoiding the enforcement of private promise addresses only “promissory” theories of promissory estoppel, not reliance-based theories. Reliance, or harm-based, considerations are among the public policy reasons that should motivate enforcement of certain kinds of private promise. 712 FLORIDA STATE UNIVERSITY LAW REVIEW [Vol. 38:707 the realm of employment. Contract law should bend over backwards to bring such promises into the fold. I will begin in Part I by presenting my central argument with respect to the relation between contract and promise in greater detail. Also in that Part, I will explore the distinct moral character of contract and assess (and reject) certain objections to my approach. I aim to present a fairly detailed conception of what private promise entails, but the thrust of my argument does not depend on the plausibility of those details. While I present a view of private promising in which a promisor commits to treating the promisee’s related interests as equal to or greater than those of the promisor, the remainder of my argument requires the reader to agree only that the moral value of promising depends on voluntary performance. After my discussion of the tension between promise and contract, I will consider the implications of the moral separateness of contract and private promise for contract law. In Part II, I will explore the implications for the regulation of private promise, including those cases where the state has a compelling reason not to cede territory to private norms altogether. I will suggest that, where it is necessary to regulate private promise, the state can minimize interference by offering excuses and remedies that differ from those in the private norm regime. In Part III, I consider another type of uneasy coexistence: cases of hollow private promise where the extralegal status of promising reflects oppression rather than ethical flourishing. In these cases, private promise is the one that should make room for contract. At this point it is worth pausing to clarify certain basic features of the argument here. First, while I am critical of certain aspects of existing doctrine, on the whole, I believe my account of the tension between contract and promise is consistent with contemporary trends in contract law and related fields. Second, given that I see contract and private promise as fundamentally different, I do not follow those who argue that contract law is or should be patterned on promissory norms. But nor am I arguing that, because contract and promise are fundamentally different, promissory norms should have nothing to do with contract law. I agree with Shiffrin that we should start from the premise that “law must be made compatible with the conditions for moral agency to flourish.”8 Unlike Shiffrin, I believe that 8. Shiffrin, supra note 3, at 712. Shiffrin calls her own approach accommodationist and distinguishes it from reflective and separatist approaches. A reflective approach seeks to model contractual obligations on moral ones, while a separatist believes that because contract has its own goals and purposes, “[t]heir pursuit does not require engagement with other moral concerns.” Id. at 713. 2011] SEPARATING CONTRACT AND PROMISE 713 contract law’s accommodation of promise usually entails steering clear of private promise.9 Finally, my approach is consistent with a largely economic approach to contract. A normative defense of the economic approach, however, calls for something more than an attempt to justify the pursuit of welfare or the satisfaction of preferences. There are few that would discount the moral value of promoting welfare, satisfying most preferences, or even increasing aggregate wealth. It is implausible that these are not legitimate ends of state activity. The problem, where there is one, arises when there is a prior moral principle that must be satisfied before the state is free to pursue welfare. There are such principles, but those which have been sometimes taken to saturate contract law, leaving little or no room for efficiency concerns, are misguided. They generally stem from theories of promise which take contract to be within their undifferentiated territory. If the economic approach has thus far been taken to compete with moral theories of promise, my aim is to suggest that while both contract and private promise have rich moral import, their respective moral significance is best revealed in contrast. I. THE SEPARATE DOMAINS OF CONTRACT AND PRIVATE PROMISE A. The Character of Private Promising Charles Fried has argued that the principle of autonomy requires that individuals be able to bind themselves by promising.10 In Contract as Promise he wrote this: In order that I be as free as possible, that my will have the greatest possible range consistent with the similar will of others, it is necessary that there be a way in which I may commit myself. It is necessary that I be able to make nonoptional a course of conduct that would otherwise be optional for me. By doing this I can facilitate the projects of others, because I can make it possible for those others to count on my future conduct, and thus those others can pursue more intricate, more far-reaching projects.11 Autonomy, on the part of both promisor and promisee, is promoted by a practice of promising.12 Fried is primarily concerned with the au9. Cf. Joseph Raz, Promises in Morality and Law, 95 HARV. L. REV. 916, 933 (1982) (reviewing P.S. ATIYAH, PROMISES, MORALS, AND LAW (1981)) (“One protects the practice of undertaking voluntary obligations by preventing its erosion—by making good any harm caused by its use or abuse.”). 10. CHARLES FRIED, supra note 1, at 14-17. 11. Id. at 13. 12. Fried was generally focused on the autonomy interests of the promisor. But as this passage suggests, the autonomy interests of the promisee are also implicated. Kimel suggests a way in which those interests might be taken into account. In discussing the case Jacob & Youngs v. Kent, 129 N.E. 889 (1921), Kimel suggests that “[t]he question that 714 FLORIDA STATE UNIVERSITY LAW REVIEW [Vol. 38:707 tonomy interests of the promisor, and he views enforcing promises as a required form of respect toward the promisor.13 But given that promising promotes promisors’ autonomy because it expands their capacity to shape their normative world, any state action that makes it more difficult for them to set the terms of their relations with other moral agents diminishes rather than enhances their autonomy. I suggest here that by enforcing certain promises, the state makes it more difficult for individuals to make private promises. But before I attempt to show why enforcing a private promise may undermine autonomy rather than enhance it, it is useful to identify an important jump in Fried’s own argument.14 The fact that autonomy may require that I “be able to make nonoptional a course of conduct that would otherwise be optional for me”15 does not, until the meaning of “nonoptional” is clarified, suggest in any way that the course of conduct must be made illegal. Any number of obstacles might remove a course of conduct as an option. Impossibility is one. Prohibitively high costs, including social sanction and reputation loss, is another. Immorality and illegality are other dispositive reasons to forego a course of conduct. It may be unduly burdensome if people can only make binding commitments by rendering nonperformance impossible or highly costly for themselves. But promising is an easy way to make conduct nonoptional for people in contexts where they believe their promises are morally binding and feel bound by moral principles. Whether legal liability is a higher or lower hurdle to changing one’s mind than should be asked in analyzing such a case form the perspective of personal autonomy is just how significant an expression of autonomy is a person’s wish to have his house equipped with ‘Reading’ pipes rather than with virtually identical pipes of a different make.” Kimel, Neutrality, supra note 5, at 484. The idea is that a liberal committed to enforcing promises because they are an expression of personal autonomy need not defer to not-so-important promises, or ones which do not implicate the autonomy interests of the promisee. Kimel seeks to save liberals from the libertarians, that is, to explain why morally problematic promises—including ones that are morally problematic in light of complex social concerns—may be taken off the table without violating core liberal principles. 13. “If we decline to take seriously the assumption of an obligation . . . to that extent we do not take [the promisor] seriously as a person.” CHARLES FRIED, supra note 1, at 20-21. 14. Randy Barnett seems to make a similar move when he argues that “freedom to contract . . . stipulates that persons should have the power to alter by their consent their legal relations.” Randy E. Barnett, Some Problems with Contract as Promise, 77 CORNELL L. REV. 1022, 1023-24 (1992). It is not clear why freedom of contract should be defined thus or, in particular, how this conception of freedom of contract follows from the moral value of our capacity to enter moral commitments. In any case, it is worth noting that, as I am only addressing the default rules of enforceability, there is nothing in what I am saying that would preclude the law from recognizing as enforceable certain private promises where the promisor and promisee jump through enough hoops. Thus, under my approach, nobody would lack the ability to render a commitment binding where the other party consented to that arrangement; but as the relationship between the parties appears more intimate, the parties would have to do more to definitively demonstrate that they intend their arrangements to have legal force. 15. CHARLES FRIED, supra note 1, at 13. 2011] SEPARATING CONTRACT AND PROMISE 715 moral constraint may vary from person to person as an empirical matter; but, as a normative matter, a moral principle requiring the performance of promises may suffice in certain contexts to enable individuals to bind themselves and, more generally, to shape their moral world. In fact, the alteration of the moral status of one’s future choices is probably the most important aspect of private promises.16 Moral agency consists in one’s ability to change one’s own and other’s normative status, i.e., the rights and obligations we have against each other.17 But there is nothing in moral agency per se that requires corresponding legal agency.18 This shows only that enforcing promises is not necessary to enable prospective promisors to exercise moral autonomy. It does not, however, address the autonomy interests of promisees, who would benefit from greater assurance that their reliance is not misplaced, and it does not deny that enforcing promises might thereby indirectly promote promisors’ autonomy (because their choices, too, will expand as a result of promisee assurance). It may be that moral autonomy is well served by the enforcement of many kinds of promises, notably promises to strangers. The heart of my argument is that, whatever its advantages, enforcing private promises is in other respects too costly from a moral point of view to justify the legal enforcement of those promises in the usual case. The moral cost of enforcing private promises stems from the character of the relationships within which those promises are usually made. Not all noncommercial promises are made within the context of personal relationships, but most are.19 Most people do not make 16. Cf. Thomas Scanlon, Promises and Practices, 19 PHIL. & PUB. AFF. 199, 211 (1990) (“[W]hen I say ‘I promise to help you if you help me,’ the reason I suggest to you that I will have for helping is just my awareness of the fact that not to return your help would, under the circumstances, be wrong: not just forbidden by some social practice, but morally wrong.”). 17. Cf. Joseph Raz, Voluntary Obligations and Normative Powers, in NORMATIVITY AND NORMS: CRITICAL PERSPECTIVES ON KELSENIAN THEMES 468 (Stanley L. Paulson & Bonnie Litschewski Paulson eds., Bonnie Litschewski Paulson et al. trans., 1998) (“[T]o the extent that promises are a source of voluntary obligations they are made by the exercise of normative powers.”). 18. The power to change one’s legal status may effectively enhance moral agency in some contexts. The question here is whether promising is one of those cases; I argue it is not. At the least, exercising legal agency through private promising does not enhance moral agency. 19. Barbara Fried, Is as Ought: The Case of Contracts, 92 VA. L. REV. 1375, 1382 (2006) (suggesting that most people view promises “as continuous . . . with status relationships”). Even Markovits, who sees contract as an instance of promise among strangers who cease to be strangers, acknowledges that promise is more likely (or at least, the reasons for making promises are greater and more compelling) between those who are already involved with one another in some way. See Markovits, supra note 2, at 1437. While he recognizes that his moral theory of promising is “most suited to personal, benevolent promises,” he does not go the road of focusing on personal promises. Id. at 1449-50. Markovits describes the duty to enter into promises as an imperfect duty, sometimes more perfect